On Efficient Aggregation of Distributed Energy Resources

Abstract

Distributed energy resources (DERs) such as solar panels have small supply capacities and cannot be directly integrated into wholesale markets. So, the presence of an intermediary is critical. The intermediary could be a profitseeking entity (called the aggregator) that buys DER supply from prosumers, and then sells them in the wholesale electricity market. Thus, DER integration has an influence on wholesale market prices, demand, and supply. The purpose of this article is to shed light onto the impact of efficient DER aggregation on the market power of conventional generators. Firstly, under efficient DER aggregation, we quantify the social welfare gap between two cases: when conventional generators are truthful, and when they are strategic. We also do the same when DERs are not present. Secondly, we show that the gap due to market power of generators in the presence of DERs is smaller than the one when there is no DER participation. Finally, we provide explicit expressions of the gaps and conduct numerical experiments to gain deeper insights. The main message of this article is that market power of conventional generators can be mitigated by adopting an efficient DER aggregation model.

Competitive DER Aggregation for Participation in Wholesale Markets

“…Two significant prior works from this type of DER aggregations are Alshehri et al [12] and Gao et al [13], where DERA's profit-maximization involving DER in the distribution system and the wholesale market is considered. In both cases, the authors considered DERA coordinated decentralized aggregation of generation resources, which can be modeled as a Stackelberg game.…”

“…While the notion of competitive DER aggregation has not been formally defined, two prior works have developed competitive aggregation solutions [10], [13]. In [10], Chakraborty et al considers DER aggregation by a CCA within the distribution system where the authors provide a pricing mechanism that offers its customers superior surplus than that under the NEM tariff of the regulated utilities.…”

“…Most relevant to our work is the DERA's wholesale market participation method developed by Gao, Alsheheri, and Birge [13] where the authors consider a profit-seeking DERA aggregating BTM renewable generations offering its aggregated generation resources to the wholesale market. In particular, the Gao-Alshehri-Birge (GAB) approach guarantees its customers to achieve a surplus equal to that achievable by their direct participation in the competitive wholesale market.…”

“…In other words, the GAB approach is competitive with the most economically efficient participation model. A significant difference between the approach in [13] and this paper is that we formulate a general competitive aggregation problem that includes the regulated utility or CCA. In achieving DERA's profit maximization objective, our DER aggregation and market participation models are quite different from that in [13].…”

“…The approach proposed in [13] follows the earlier work of Alshehri, Ndrio, Bose, and Bas ¸ar [12] where a Stackelberg game-theoretic model is used. Both approaches assume that the DERA elicits prosumer participation with a (one-part or two-part) price, and the prosumer responds with its quantity to supply.…”